BPU Investment Management, Inc.
Form ADV Part 2A
May 2017
Principal Office
One Oxford Centre 301 Grant Street, Suite 3300, PA 15219
(800) 822-6585
www.bpuinvestments.com
This brochure provides information about the qualifications and business practices of BPU Investment
Management, Inc. (“BPU” or the “Adviser”). If you have any questions about the contents of this
Brochure, please contact our Chief Compliance Officer at (800) 822-6585 or email
[email protected].
Additional information about BPU is also available on the SEC’s website at: www.adviserinfo.sec.gov.
BPU is registered as an investment adviser with the United States Securities and Exchange Commission
(“SEC”) under the Investment Advisers Act of 1940 (“Advisers Act”). Registration as an investment
adviser with the SEC does not imply a certain level of skill or training. The information in this Brochure
has not been approved or verified by the SEC or by any state securities authority.
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Item 2: Material Changes
Since filing our last annual amendment on March 30, 2016, there have been the following material
changes to BPU’s Brochure:
As of August 2016, Mr. Rick Pielchalski is no longer a shareholder of BPU. His shares were sold to Mr.
Robert Unkovic, President and Mr. Paul Brahim, Chief Executive Officer. In addition, in February of 2017
Mr. Daniel Unkovic was named Chief Operations Officer.
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Item 3: Table of Contents
Item 1: Cover Page …………………………………………………………………………………………………………………………………1
Item 2: Material Changes ……………………………………………………………………………………………………………………….2
Item 3: Table of Contents ……………………………………………………………………………………………………………………….3
Item 4: Advisory Business ……………………………………………………………………………………………………………………….4
A. Assets Under Management ………………………………………………………………………………………………………..4
B. Discretionary Accounts ………………………………………………………………………………………………………………4
C. Non-Discretionary Accounts ………………………………………………………………………………………………………5
Item 5: Fees and Compensation ……………………………………………………………………………………………………………..5
A. Discretionary Accounts ………………………………………………………………………………………………………………6
B. Non-Discretionary Accounts ………………………………………………………………………………………………………7
C. Other Advisory Fees …………………………………………………………………………………………………………………..7
Item 6: Performance Based Fees and Side-by-Side Management ……………………………………………………………8
Item 7: Types of Clients …………………………………………………………………………………………………………………………..8
Item 8: Methods of Analysis, Investment Strategies and Risk of Loss ……………………………………………………..8
Item 9: Disciplinary Information ……………………………………………………………………………………………………………12
Item 10: Other Financial Industry Activities and Affiliations ………………………………………………………………….12
Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading ……………..13
Item 12: Brokerage Practices ………………………………………………………………………………………………………………..14
Item 13: Review of Accounts ………………………………………………………………………………………………………………..17
Item 14: Client Referrals and Other Compensation ……………………………………………………………………………….17
Item 15: Custody …………………………………………………………………………………………………………………………………..18
Item 16: Investment Discretion …………………………………………………………………………………………………………….18
Item 17: Voting Client Securities …………………………………………………………………………………………………………..18
Item 18: Financial Information ………………………………………………………………………………………………………………19
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Item 4: Advisory Business
BPU is registered with the U.S. Securities and Exchange Commission (“SEC”) as an investment advisor
under the Investment Advisers Act of 1940, as amended. The firm was founded as Berkowitz and
Pierchalski, in 1986. BPU has two principal owners: Mr. Robert Unkovic, President and Mr. Paul Brahim,
Chief Executive Officer.
A. Assets Under Management
BPU manages client assets on both a discretionary and non-discretionary basis. As of December 31,
2016, BPU managed approximately $413,697,586 on a discretionary basis and
$14,971,529 on a non-discretionary basis.
BPU is a multi-disciplinary wealth management firm. We provide financial planning and wealth
management services to clients. We recognize that each client’s needs and circumstances are unique
and offer personalized advisory services. Clients may impose restrictions on investing in certain
securities or the types of securities.
BPU provides discretionary and non-discretionary account services.
B. Discretionary Accounts
BPU provides client accounts with discretionary investment service where BPU exercises trading
authority or control over the managed account. Discretionary services include portfolio advisory
solutions, sub advisory relationships, and wrap accounts.
Portfolio Advisory Solutions
BPU’s advice takes into account the financial background and investment objectives of each Client as
agreed upon during initial and ongoing personal consultations. BPU offers its discretionary investment
advisory services through its Portfolio Advisory Solutions (“PAS”), in which BPU provides investment
advisory and brokerage service through the use of asset allocated investment models (which can include
traditional index funds, actively managed mutual funds, ETFs, and separately or individually managed
accounts in a unified strategy). Clients may impose restrictions on investing in certain securities or types
of securities.
Sub Advisory Relationships
BPU may provide investment advisory services through a sub-advisor relationship wherein BPU may hire
non-affiliated investment managers to invest client accounts on a discretionary basis. BPU as the
investment advisor maintains discretion to change sub-advisors in the portfolio based on the client’s
objectives and individual needs as well as the performance of the sub-advisor. The sub-advisors may
employ a variety of investment strategies which may utilize, mutual funds, ETF’s, individual securities,
etc.
Wrap Accounts
BPU serves as a portfolio manager in a number of wrap fee programs. These wrap fee programs are
arrangements in which investment advisory services, brokerage execution services and custody are
provided by a sponsor for a single predetermined "wrap" fee (regardless of the number of trades
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completed by a client). Generally, client participating in a wrap fee program (“Wrap Program Clients”)
pay this single, all-inclusive fee quarterly in advance to the program sponsor, based on the net assets
under management. BPU receives from the program sponsor a portion of the wrap fee for the portfolio
management services it provides. BPU generally provides the same advisory services to wrap programs
as it does with other accounts. BPU as the program sponsor provides a separate brochure that contains
detailed information about the wrap program, including the wrap fee charged.
C. Non-Discretionary Accounts
BPU provides client accounts with non-discretionary investment recommendations. BPU will implement
transactions only at the direction of the client. Financial advisors may recommend stocks, bonds or
other assets of any kind, consistent with the client’s investment objectives and restrictions set forth in
the Client Profile that clients complete with assistance from their financial advisor. Additionally, clients
may place unsolicited trades in their account. Non-discretionary account services include financial
planning, investment fiduciary consulting, retirement plan consulting, and IRA rollovers.
Financial Planning Services
BPU adheres to a multi-step, continuous process in offering individualized financial planning services.
We begin by gathering detailed financial information about you and your goals. After we’ve gathered all
of the required information, our advisors in collaboration with our Certified Financial Planner™
Practitioners then analyze that data and evaluate your current financial condition. They develop
recommendations that are peer reviewed by our financial planning committee before we present them
to you. We assist you with implementing those recommendations and finally, through regularly
scheduled reviews, we monitor your progress and adjust your plan as your life circumstances change.
Investment Fiduciary Consulting
Fiduciary Consulting may include; providing an assessment of investment practices, analyses of current
investment strategy and holdings, asset allocation modeling, development of an investment policy
statement and manager search selection, ongoing monitoring and review through quarterly investment
committee meetings. In accordance with Center for Fiduciary Excellence (“CEFEX”) standards, all
fiduciary consulting is completed by an Accredited Investment Fiduciary Analysts (AIFA) and CEFEX
analysts.
Retirement Plan Consulting
BPU will work with plan sponsors and fiduciaries to establish the investment policies and objectives for
the Plan and set forth the asset classes and investment categories to be offered under the Plan, as well
as the criteria and standards for selecting and monitoring the investments. BPU will also prepare
periodic reports to assist plan fiduciaries in monitoring the performance and overall fees and expenses
against the guidelines set forth in the Investment Policy Statement.
As a registered investment advisor subject to Section 206 of the Advisers Act, BPU acts as a Fiduciary
related to the conduct of its investment advisory services. As such BPU has an obligation to act in the
best interest of its clients guided by the core fiduciary duties of loyalty and care. BPU will adhere and
comply with the following Impartial Conduct Standards;
(1)
BPU will provide investment advice that is, at the time of the recommendation, in
the Best Interest of the client. Such advice shall reflect the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent person acting in a
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(2)
(3)
like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, based on the investment
objectives, risk tolerance, financial circumstances, and needs of the client, without
regard to the financial or other interests of BPU or any affiliate, related entity, or
other party;
The recommended transaction will not cause BPU or their affiliates or related
entities to receive, directly or indirectly, compensation for their services that is in
excess of reasonable compensation within the meaning of ERISA section 408(b)(2)
and Code section 4975(d)(2);
Statements by BPU to the client about the recommended transaction, fees and
compensation, Material Conflicts of Interest, and any other matters relevant to a
client’s investment decisions, will not be materially misleading at the time they are
made.
Item 5: Fees and Compensation
BPU is compensated for providing advisory services in the following ways:
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A percentage of assets under management
Hourly Fees
Fixed Fees
Advisory services and fees are specified in an advisory agreement between the client and BPU. Terms of
such agreements may be negotiated on a case by case basis. Clients may select to deduct fees directly
from the client’s account or pay fees directly. Certain fees may be payable in advance or arrears as
indicated by the advisory agreement. BPU does not require or solicit payment of fees in excess of $1,200
more than six months in advance of services rendered. Upon termination of an advisory agreement any
unearned prepaid fees will be refunded to the client.
BPU charges investment management fees quarterly, in advance. Our investment management
agreements remain in effect until either Party gives written notice to the other Party of its intention to
terminate this Agreement. BPU or you may terminate your agreement, without penalty, upon at least 30
days written notice by either Party. Transactions in progress will be completed in the normal course of
business. Upon 30 days written notice of termination, you will receive a pro-rata refund of that portion
of any prepaid advisory fees that have yet to be earned by BPU. Your refund will be calculated from the
date of receipt of the written termination notice or other agreed upon date.
A. Discretionary Accounts
Portfolio Advisory Solutions (“PAS”)
Portfolio advisory fees range between 0.50% and 1.5% of assets under management. Fees are billed
quarterly in advance based on assets under management.
BPU uses a weighted fee schedule. For example, if a client has $1,000,000 of investable assets and the
weighted billing schedule is 1.5% for the first $500,000 and 1.25% for the next $500,000, the weighted
billing rate of 1.38% would be applied. Although BPU has established the following schedule we retain
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the right to negotiate alternative fee arrangements on a case by case basis. In addition, a flat fee of
0.35% are charged for a cash reserves model.
Aggregate Market Value of Assets Under Management Fee Table
$0 to $500,000
1.50%
$500,001 to $1,000,000
1.25%
$1,000,001 to $2,500,000
1.0%
$2,500,001 to $5,000,000
0.75%
$5,000,001 or more
0.50%
While the fee schedule described above reflects fees for new clients, fees charged are entirely depended
on the agreement between BPU and the client. Clients’ agreements may reflect a fee arrangement
different than the schedule above.
Sub Advisory Relationships
Sub Advisor accounts are charged a fee that is for investment advice. The maximum fee for this service
is 1.50% which is negotiable. In addition, clients may pay a separate management fee to the sub advisor.
Any refunds of the sub advisory program are at the discretion of the sub advisor. Fees may be charged
either quarterly in advance or arrears.
Wrap Accounts
See Wrap Fee Brochure.
B. Non-Discretionary Accounts
Financial Planning Services
Financial planning fees are generally based on an hourly rate, ranging from $150 to $350 per hour. One
half of the estimated fee is due at inception and the remainder at the conclusion of the engagement. A
flat fee can also be charged based on the client’s agreement.
Investment Fiduciary Consulting
Investment fiduciary consulting fees are generally based on an hourly rate, ranging from $150 to $350
per hour, with a minimum fee of $7,500. One half of the estimated fee is due at inception and the
remainder at the conclusion of the engagement.
Retirement Plan Consulting
Retirement plan consulting fees may be based on the asset size of the client or based on an hourly rate
ranging from $150 to $350 per hour. One half of the estimated fee is due at inception and the remainder
at the conclusion of the engagement. A flat fee can also be charged based on the client’s agreement.
C. Other Advisor Fees
All fees paid to BPU for investment advisory services are separate and distinct from the fees and
expenses that may be charged by other advisors (including separate account managers, mutual funds
and/or ETFs). These fees and expenses are described in the management agreement or prospectus.
These fees will generally include a management fee and other fund expenses. Accordingly, the client
should review both the fees charged by other advisors and funds and our fees to fully understand the
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total amount of fees to be paid by the client and to thereby evaluate the advisory services being
provided.
Custodian and Brokerage Fees
In addition to our advisory fees, clients are also responsible for the fees and expenses charged by
custodians and imposed by broker dealers, including, but not limited to, any transaction charges
imposed by a broker dealer. Please refer to “Brokerage Practices” section (Item 12) for additional
information.
Commissions and 12b-1 Fees
12b-1 fees are known in the securities industry as trailers and service fees. Mutual funds charge
investors 12b-1 fees to cover fund distribution and/or shareholder service expenses pursuant to Section
12(b) of the Investment Company Act of 1940 and Rule 12b-1 thereunder, and pass these fees on to the
fund’s distributor, which passes some or all of them to broker-dealers and other intermediaries whose
customers hold fund shares. BPU receives 12b-1 fees from mutual funds and/or mutual fund
distributors. BPU does not receive these fees for all mutual fund share classes. Fees are only received
for share classes that pay such fees. Clients should review the mutual fund prospectus to learn more
about the fees and expenses related to the mutual funds BPU recommends. Not all share class pay 12b1 fees. In certain instances, BPU may recommend a share class that pays 12b-1 fees rather than a
cheaper alternative share class. Clients are hereby made aware that there may be a cheaper share class
available that was not recommended by BPU. Additionally, Clients should consider the impact of
transaction costs related to mutual fund purchases. Certain share classes have transaction related
expenses and others do not have transaction fees. All of these additional fees and expenses will
increase the overall investment cost to the Client.
The choice of share classes is a complex issue. Please discuss this with your BPU Advisor or BPU
Compliance Officer to ensure that you understand the choices involved. Additional information on this
topic is available by reading the investment prospectus and on websites maintained by the Securities
and Exchange Commission (www.sec.gov) and the Financial Industry Regulatory Association
(www.FINRA.org).
BPU as a dually registered broker-dealer and/or its properly licensed employees receive brokerage
commissions or mutual fund service fees (12b-1 fees) for certain transactions, as disclosed within
prospectus. BPU employees licensed as broker-dealer registered representatives and/or licensed as
insurance agents, in this separate capacity, are able to implement investment recommendations for
advisory Clients and are compensated by commissions or other fees for certain transactions. This
presents a conflict of interest to the extent that recommendations are made to Clients that result in
additional compensation for BPU or the employee. Clients should be aware that the receipt of additional
compensation, such as 12b-1 fees, presents a conflict of interest between BPU and the Client and could
affect our advisory relationship, recommendations and advice.
Because BPU does not offer proprietary products, Clients are not under any obligation to engage BPU
when considering implementation of advisory recommendations. Clients have the option to purchase
investments and insurance products through other advisers. When the Client has provided written
authorization that gives BPU trading discretion for an account BPU will not contact the Client prior to
implementation of transactions. When the Client has selected a financial planning or non-discretionary
management service the Client is not obligated to engage BPU when implementing advisory
recommendations. In cases were the Client has selected non-discretionary management, the
implementation of any or all recommendations is solely at the discretion of the Client.
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BPU has entered into an arrangement with Fidelity Brokerage Services, LLC ("FBS") whereby we are paid
a percentage of the 12b-1 fees (Non ERISA accounts) received by FBS as it relates to shares of eligible
mutual funds held in BPU’s client accounts. As a result, BPU has an incentive to invest client assets in
mutual funds for which it receives this additional compensation. However, BPU shall maintain its
fiduciary duty of best execution by selecting the most appropriate share class available, which may or
may not be the lowest-price share class available. Moreover, BPU shall maintain its fiduciary duty by
recommending money managers that it deems appropriate and suitable for its clients. In addition, BPU’s
due diligence process when selecting money managers includes complying with the standard set by the
Center for Fiduciary Studies recommendation in that an investment product not be in the bottom
quartile of expenses (including any 12b-1 fees) relative to its peers. Further information regarding 12b-1
fees may be found in the respective mutual funds’ prospectuses.
BPU does not receive any 12b-1 remuneration on ERISA Accounts.
Please refer to “Brokerage Practices” section (Item 12) and “Other Financial Industry Activities and
Affiliations” (Item 10) for additional information.
Item 6: Performance Based Fees and Side-by-Side Management
BPU does not charge any performance fees.
Item 7: Types of Clients
BPU provides asset management and advisory services to individuals, high net worth individuals, trusts,
non-profit organizations, retirement plans, corporations, other businesses and institutions.
Item 8: Methods of Analysis, Investment Strategies and Risk of Loss
BPU applies Modern Portfolio Theory techniques to provide investment management services to clients.
We adhere to the following process when providing these investment services:
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Analyze client’s current investment position
Design optimal portfolio(s)
Formalize a written investment policy statement
Select investment managers to implement the policy
Monitor investment results
Periodic rebalancing back to target allocations
BPU manages portfolios in house, each with its own methods of analysis, investment strategies and
risks. BPU may also enter into a sub-advisor relationship, wherein BPU will hire a non-affiliated manager
under a traditional advisory service platform.
Investment Management Philosophy for PAS Program
The Modern Portfolio Theory principles of asset class and security diversification guide our investment
management process. The process utilizes various statistical methods of asset class analysis. This
approach attempts to classify, quantify and manage both the type and amount of investment risk in a
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portfolio. It shifts the emphasis onto overall portfolio composition and behavior rather than on that of
any single security.
The “Efficient Market Hypothesis” is the foundation for this focus shift. We concede that, in an efficient
market, individual security prices adjust rapidly based on the amount of information available to
investors. Because of this, we also believe that most traditional securities analysts are not able to use
either fundamental or technical analysis techniques to “outsmart” an efficient market and achieve
consistently superior returns.
In recognition of the Efficient Market Hypothesis and in an attempt to understand and manage risk,
Modern Portfolio Theory addresses two broad forms of investment risk, systematic and nonsystematic.
Systematic risk is that risk which is common to all stocks and bonds within a particular market. Known
more commonly as “market risk,” systematic risk is the tendency for security prices to rise or fall in
concert with the broad market.
Nonsystematic risk is company or industry specific risk. Strikes, natural disasters, product recalls or
takeover bids may cause the price of a stock to decline even in a broadly rising market. This helps to
explain why the more diversified an investor’s portfolio, the less subject it is to nonsystematic risk.
BPU’s disciplined investment process recognizes and seeks to reduce both types of risk. With respect to
managing systematic or market risk, we invest each client’s portfolio in multiple asset classes, that is to
say, multiple markets. These asset classes include, but are not limited to money markets, domestic
bonds, foreign bonds, domestic stocks, foreign stocks and alternative investments. We further diversify
fixed income allocations by incorporating varying credit qualities and maturities. For equities, we also
diversify by market capitalization and employ both growth and value investment styles – all in the hope
of pairing asset classes that exhibit differing behavior in the same economic environment.
In implementing each selected asset class, BPU seeks to reduce the nonsystematic form of risk by
diversifying the securities within each asset class. To do this, we use broadly diversified index funds
and/or ETF’s concurrent with professionally managed mutual funds and/or separately or individually
managed accounts. In this way, we seek to cost effectively manage both systematic and nonsystematic
risk by diversifying both asset classes and the individual securities within each asset class.
Finally, portfolio construction is driven by understanding your clearly articulated goals and objectives in
the context of your time horizon, risk tolerance, expectation of return, asset class preferences and/or
restrictions and tax status. BPU translates this into an investment policy statement that serves as the
written business plan for each investment strategy.
Portfolio Manager Selection and Evaluation
BPU will work with each client to develop an appropriate selection of Investment Manager(s) that BPU
believes best meet(s) the client’s goals and investment objectives, and will assist clients in the
appropriate selection of Investment Managers in line with the recommended asset allocation.
Recommendations are based upon the information gathered in developing an investment policy for the
client. BPU will review the client’s investment objectives and goals, net worth, current income, future
income needs, liquidity needs, risk tolerances, tax considerations, and other specific items
communicated by the client (collectively, “Investment Considerations”). Then the portfolio’s current
investment structure is reviewed by BPU. An assessment is made based upon economic and market
conditions and the investment considerations. A recommendation as to the client’s appropriate asset
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mix may be developed based on BPU’s assessment of the information provided by the client. In order for
BPU to properly monitor the asset allocation and Investment Managers selected, clients must promptly
inform BPU in writing if their information changes.
Various Investment Manger styles and strategies are made available to clients. Investment Managers
are selected through a detailed assessment of their investment philosophy, style, and methodology.
Investment Managers will be assessed and chosen independently by BPU in accordance with the criteria
herein.
BPU employs a multi-step process in screening Managers to determine if the Managers are suitable for
BPU’s program. After the above parameters have been satisfied, the review continues and includes, but
is not limited to, conducting a general review of the organization (history, ownership, employees, etc.),
gaining an understanding of the Investment Manager’s investment process, asset allocation strategies,
and reviewing the Investment Manager’s Form ADV, Item 1A, 2A and 2B disclosures. BPU then verifies
the information provided by comparing it to other data from publicly available data collection sources.
BPU may further verify the information provided by employing quantitative and qualitative screens as
well as attribution analysis and risk analysis.
BPU relies on information obtained from the following sources to reach its conclusions regarding each
Manager:
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Manager’s prospectus, Form ADV and or accompanying documents;
Manager’s website and other publicly-available information;
SEC website;
BPU’s meetings with Manager’s personnel; and
External, commercially available databases.
Replacement Investment Managers may be recommended for various reasons such as, among other
things, portfolio management inconsistent with an Investment Manager’s stated style and philosophy,
significant performance variances from the stated benchmark over a market cycle, a departure of a key
employee from an Investment Manager who was integral to the Investment Manager’s performance
record, and/or serious regulatory problems or compliance issues.
A breakdown of BPU Sponsored Wrap Fee Programs is provided in the Wrap Fee Brochure, with
indications of whether the manager is affiliated with BPU, modeled or non-modeled, discretionary or
non-discretionary.
All BPU managed portfolios allow for advisor customization within each strategy for each of the
portfolios listed.
Primary Investment Vehicles and Risks
Mutual funds and exchange traded funds own underlying securities that may be exposed to loss of
principal due to adverse market conditions. Foreign securities in mutual funds may also expose your
portfolio to potential loss due to currency risk.
Asset allocation, diversification and rebalancing do not assure a positive return or protection against
loss.
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Investments in Bonds or Fixed Income are subject to interest rate risk. Bond prices generally fall when
interest rates rise. All bonds, excluding US Treasuries, have a risk of default. Non-Domestic bonds and
High Yield bonds generally carry a greater risk due to the nature of the issuers. Non-Domestic bonds are
subject to economic, political and currency risk and may experience a greater degree of market
volatility. High Yield bonds are speculative, have a higher risk of default or are already in default, tend to
be less liquid and are more difficult to value than higher grade securities. These bonds tend to be more
volatile and more susceptible to adverse events and negative sentiments.
Investments in Small and/or Mid Cap companies generally carry a great risk and may experience a
greater degree of market volatility.
Investments in Global or International securities are subject to economic, political and currency risk and
may experience a greater degree of market volatility.
Long/Short and Market Neutral investments are unique and complex strategies designed to “neutralize,”
or limit, the effect of stock market movement on returns. Because of this, return is often uncorrelated to
that of the stock market. Strategies involve long- and short-selling and carry specific risks not found in
traditional investments.
Real estate investments may be subject to a higher degree of market risk because of concentration in a
specific industry, sector or geographical region. Real estate investments may be subject to risks
including, but not limited to, declines in the value of real estate, risks related to general and economic
conditions, changes in the value of the underlying property owned by the trust and defaults by
borrower.
Writing and purchasing call and put options are highly specialized activities and have greater than
ordinary investment risks. The successful use of options depends in Item on the future price fluctuations
of the underlying reference security. Values may fluctuate, and you may lose all of the cash paid for
purchasing and could be at risk of losing the underlying stock if used to cover.
Investments in commodities may have greater volatility than investments in traditional securities,
particularly if the instruments involve leverage. The value of the investments are subject to changes in
overall market movements, commodity index volatility, changes in interest rates, or factors affecting a
particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs
and international economic, political and regulatory developments. Use of leveraged commodity-linked
derivatives creates an opportunity for increased return but at the same time, creates the possibility for
greater loss.
Item 9: Disciplinary Information
Registered investment advisers are required to disclose all material facts regarding any legal or
disciplinary events that would be material to a client’s or investor’s evaluation of the adviser or the
integrity of the adviser’s management. This section contains information on certain legal and regulatory
matters affecting BPU.
On August 4, 2009, Mr. Nadav Baum, Executive Vice President and Financial Adviser for BPU, submitted
a Letter of Acceptance, Waiver and Consent for the purpose of settlement of alleged rule violations
brought by FINRA. Alleged violations related to trading violations during Baum’s employment with
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Citibank. Without admitting or denying the allegations, Mr. Baum consented to the described sanctions
and to the entry of findings. As a result, Mr. Baum was fined $15,000 and suspended from September 8,
2009 through October 7, 2009. The findings stated that Nadav Baum engaged in discretionary trading
without written authorization in a deceased customer’s account and discretionary trading without
written authorization in other customers’ accounts. As of May 2016, Nadav Baum is no longer an
Adviser for BPU.
On or about October 24, 2012, BPU submitted a Letter of Acceptance, Waiver and Consent for the
purpose of settlement of alleged rule violations brought by FINRA. FINRA alleged that BPU, acting
through its Chief Compliance Officer, Rick Pierchalski, allowed an associated person to perform certain
functions requiring principal registration without being registered in that capacity; created an inaccurate
record relating to an Anti-Money Laundering test; and failed to implement policies and procedures
reasonably designed to detect and cause the reporting of suspicious transactions. Without admitting or
denying the findings, BPU was censured and fined $25,000, Pierchalski was fined $5,000 individually and
$10,000 joint-and-severally with BPU. In addition, Pierchalski was suspended from November 19, 2012
through February 18, 2013. As of April 2013, Rick Pierchalski is no longer an Adviser for BPU.
On February 13, 2013, Thomas Eddy, General Counsel and Investment Committee Member for BPU,
entered into a settlement agreement for the purpose of resolving alleged rule violations brought by
FINRA. Without admitting or denying the findings, Mr. Eddy consented to the described sanctions and
to the entry of findings. As a result, Eddy was fined $5,000 and suspended from March 4, 2013 through
March 22, 2013. The findings state that in about September 2010, Mr. Eddy created an inaccurate
record when he signed a document which purportedly memorialized BPU’s test of its anti-money
laundering compliance program for 2009. This conduct violated FINRA Rule 2010.
Item 10: Other Financial Industry Activities and Affiliations
Client should be aware that the receipt of additional compensation by BPU, its employees and related
Parties creates a conflict of interest that may impair the objectivity of our firm and employees when
making recommendations. While BPU does not currently receive compensation from other investment
advisers, BPU endeavors at all times to put the interest of its clients first as Item of our fiduciary duty
and will take the following steps to address this conflict if it presents itself:
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Disclose to clients the existence of all material conflicts of interest, including the potential for
our firm and our employees to earn compensation from advisory clients in addition to our
advisory fees;
Disclose the capacity in which BPU or associates are acting in the transaction and whether any
compensation is to be earned by the owners or associates;
Disclose any interest that BPU or associates have in the transaction which may be adverse to
your interest;
Clients are not obligated to purchase recommended investment products from our firm or
related parties;
BPU conducts regular reviews of client accounts and activities to verify that recommendations
made clients are suitable;
Employees are required to seek approval of outside business activities; and
We educate our employees regarding the responsibilities of a fiduciary, including the need for
having a reasonable and independent basis for the investment advice provided to clients.
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Affiliated Broker-Dealer
BPU is registered as a broker-dealer with the SEC and is a member of FINRA. BPU is an introducing
broker-dealer that clears transactions on a fully disclosed basis through Pershing, LLC. Certain
employees of the firm are also registered representatives of BPU. BPU and properly licensed employees
may receive brokerage commissions or mutual fund service fess (12b-1 fees). This is a potential conflict
of interest and could cause BPU or its representatives to recommend investments based on the
additional compensation they received.
Insurance Agents
The principals and other employees of BPU are also licensed agents for various insurance companies. In
such capacity they may recommend insurance products and receive separate, yet customary
compensation. BPU also maintains a relationship with various insurance brokerage firms who provide
insurance solutions for our advisors and our clients. Transactions placed through these firms will result
in a portion of the commission being paid to BPU.
Please refer to “Brokerage Practices” section (Item 12) and “Fees and Compensation” (Item 5) for
additional information.
Item 11: Code of Ethics, Participation or Interest in Client Transactions and
Personal Trading
BPU has adopted a Code of Ethics (“Code”) pursuant to Rule 204A-1 under the Investment Advisers Act
of 1940 and is predicated on the principal that BPU owes a fiduciary duty to its clients. Accordingly,
employees of BPU must avoid activities, interests and relationships that run contrary (or appear to run
contrary) to the best interest of clients. Therefore, BPU endeavors to maintain current and accurate
records of all personal securities accounts of its employees in an effort to monitor all such activity. The
Code addresses a variety of topics relating to the appropriate conduct of investment advisory personnel,
among other things, that employees:
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Act with integrity, competence, diligence, respect, and in an ethical manner with the public,
clients, prospective clients, employers, employees, colleagues in the investment profession, and
other participants in the global capital markets;
Place the integrity of the investment profession, the interests of clients, and the interests of the
Company above one’s own personal interests;
Adhere to the fundamental standard that you should not take inappropriate advantage of your
position;
Avoid or disclose any actual or potential conflict of interest;
Conduct all personal securities transactions in a manner consistent with this policy;
Use reasonable care and exercise independent professional judgment when conducting
investment analysis, making investment recommendations, taking investment actions, and
engaging in other professional activities;
Practice and encourage others to practice in a professional and ethical manner that will reflect
credit on yourself and the profession;
Promote the integrity of, and uphold the rules governing, capital markets;
Maintain and improve your professional competence and strive to maintain and improve the
competence of other investment professionals.
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Comply with applicable provisions of the federal securities laws.
The Company’s Code of Ethics also requires Employees to: 1) pre-clear transactions in IPOs and private
offerings, 2) report personal securities transactions on at least a quarterly basis, and 3) provide the
Company with a detailed summary of securities holdings (both initially upon commencement of
employment and annually thereafter).
BPU and/or its related persons may buy or sell the same securities recommended to clients. They may
buy or sell these securities about the same time as they are recommended to clients or at different
times. The firm monitors personal securities transactions for the possibility of a conflict of interest. If a
conflict is identified the client's interest will prevail. It is the policy of the Company that priority will
always be given to the client's orders over the orders of an employee of the Company.
A copy of the Company’s Code of Ethics shall be provided to any client or prospective client upon
request.
Item 12: Brokerage Practices
Clients select the broker-dealer and custodian for their accounts. BPU does not have discretion to select
broker-dealers or custodians for clients. BPU may recommend and clients may elect to use BPU as the
broker-dealer for their advisory account. BPU may also recommend other broker-dealers including
Fidelity Brokerage Services, Charles Schwab and others. Factors which BPU considers in recommending
brokers to clients include their respective financial strength, reputation, execution, pricing, research
capability, services provided, expertise, product availability, and/or access to certain investment
managers or strategies. Generally, the recommended custodians enable BPU to obtain many mutual
funds, ETF’s and individual securities without transaction charges or with nominal transaction charges.
The commissions, transaction fees, and/or internal fees charged by recommended custodians may be
higher or lower than those charged by other Financial Institutions.
For certain wrap programs, you will be required to establish your account with a particular custodian.
BPU has an arrangement with a variety of custodians including: National Financial Services LLC and
Fidelity Brokerage Services LLC, Pershing, Charles Schwab, and TD Ameritrade (collectively, and together
with all affiliates, "custodians"), through which they provide BPU with "institutional platform services."
The institutional platform services include, among others, brokerage, custody, and other related services
Affiliated Broker-Dealer
As described in Item 5 and Item 10 of this brochure, BPU is a registered broker-dealer. The firm and its
employees, in their separate capacity as registered representatives, can affect securities transactions for
which they may receive additional compensation.
Broker Dealers and Custodians
BPU may recommend that client establish brokerage accounts with certain broker-dealers. In addition to
our affiliated broker-dealer, BPU has established relationships with Fidelity Brokerage Services (“FBS”).
Charles Schwab & CO., Inc. (“Schwab”) and other brokers. Brokers and custodians (“Custodians”)
provide BPU with access to their institutional trading and custody services, which are typically not
available to retail investors. These services are generally available to investment advisers at no charge to
them so long as a minimum amount of business (assets in custody) is transacted with the Custodian.
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Custodian brokerage services include the execution of securities transactions, custody, research and
access to mutual funds and other investments that are otherwise generally available only to institutional
investors or would require a significantly higher minimum initial investment. Custodians also provide
BPU with proprietary and third-party research and other products and services (i.e. receipt of duplicate
trade confirmations and account statements, trading desk access, pricing information and other market
data, the ability to aggregate clients' securities transactions, the ability to directly debit advisor fees
from clients' accounts, and receipt of compliance publications. Our custodians also provide BPU with
information and consulting services intended to help BPU manage and further develop its advisory
practice. These services may include information technology consulting and marketing consulting, which
involves plan/program development, execution, reviews, performance reporting, financial planning,
contact management systems, publications, access to educational conferences, roundtables and
webinars, practice management resources, access to consultants and other third party service providers
who provide a wide array of business related services and technology with whom BPU may contract
directly.
Custodians are generally compensated by account holders through commissions and other transactionrelated or asset-based fees for securities trades that are executed through a Custodian or settle into
Custodian accounts.
Custodians also make available to our firm other products and services that benefit BPU but may not
directly benefit our clients' accounts. Many of these products and services may be used to service all or
some substantial number of our client accounts, including accounts not maintained at the Custodian
providing the service. Custodian products and services that assist us in managing and administering our
clients' accounts include software and other technology that:
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Provide access to client account data (such as trade confirmations and account statements);
Facilitate trade execution and trade orders for multiple client accounts;
Provide research, pricing and other market data;
Assist with back-office functions, recordkeeping and client reporting.
Custodians also offer other services intended to help us manage and further develop our business
enterprise. These services may include:
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Compliance, regulatory and business consulting;
Publications and conferences on practice management and business succession; and
Access to employee benefits providers, human capital consultants and insurance providers.
Custodians may make available, arrange and/or pay third-party vendors for the types of services
rendered to BPU. Custodians may discount or waive fees it would otherwise charge for some of these
services or pay all or a part of the fees of a third-party providing these services to our firm. Custodians
may also provide other benefits such as educational events or occasional business entertainment of our
personnel. In evaluating whether to recommend that clients custody their assets at a particular
Custodian, we may take into account the availability of some of the foregoing products and services and
other arrangements as Item of the total mix of factors we consider and not solely on the nature, cost or
quality of custody and brokerage services provided by a Custodian, which may create a potential conflict
of interest.
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BPU may also receive other economic benefits in the form of monetary support for client appreciation
dinners, client seminars, educational conferences and meetings and related materials sponsored by
various Financial Institutions, including but not limited to custodians, broker-dealers, mutual funds,
insurance and annuity companies and other vendors. Employees of BPU may travel for on-site visits with
investment managers. The investment management companies, for the benefit of brokers, securities
analysts, institutional investors and investment advisers, host these meetings. Typically, the mutual fund
or investment management company pays the travel and lodging expense. The investment products of
these companies are either currently used in client portfolios or are under consideration by BPU. This is
a potential conflict in that financial advisors may be incentivized by these meetings to recommend those
products. BPU seeks to mitigate this potential conflict through its manager screening process and by
requiring all travel and entertainment costs to be reported and monitored by compliance for lavish or
otherwise extravagant items. BPU’s screening process of managers may include, but is not limited to,
review of written due diligence questionnaires, telephone conversations and/or face-to-face meetings
with analysts and/or portfolio managers. Meetings focus on investment committee composition, the
hierarchy of decision-making, investment style, portfolio design, and buy-sell discipline.
BPU may also receive monetary support and business development allowances for technology,
investment research, marketing and advertising from these entities, as well as monetary support and/or
guest speakers for client events. Clients are advised that a potential conflict of interest exists to the
extent that BPU recommends products from these Financial Institutions or other vendors. However, the
client is under no obligation to purchase these products, and BPU does not receive any other form of
compensation from Financial Institutions and/or vendor for these matters other than as set forth herein.
Soft Dollar Arrangements
BPU does not currently maintain any formal soft dollar arrangements.
Brokerage for Client Referrals
BPU does not recommend broker-dealers to clients based on our interest in receiving client referrals.
Directed Brokerage
BPU does not require or permit clients to have directed brokerage arrangements.
Trade Allocation and Aggregation
Transactions for each client generally will be effected independently, unless BPU decides to purchase or
sell the same securities for several clients at approximately the same time. BPU may (but is not
obligated to) combine or "batch" such orders. Under this procedure, transactions will generally be
averaged as to price and allocated among BPU's clients pro-rata to the purchase and sale orders placed
for each client on any given day. To the extent that BPU determines to aggregate client orders for the
purchase or sale of securities, including securities in which BPU's Supervised Persons may invest, BPU
shall generally do so in accordance with applicable rules promulgated under the Advisers Act and noaction guidance provided by the staff of the U.S. Securities and Exchange Commission. In the event that
BPU determines that a prorated allocation is not appropriate under the particular circumstances, the
allocation will be made based upon other relevant factors.
Item 13: Review of Accounts
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For PAS clients, accounts will are reviewed on an ongoing basis, generally quarterly, at the time
performance analyses are completed. For financial planning clients, accounts are reviewed periodically,
as needed by the client.
We request our clients to inform BPU and their financial advisor, at least annually, of any changes in
their financial condition or of any additional investment restrictions and/or modifications to existing
investment restrictions our client wishes to impose. BPU immediately forwards to the program
managers any responses, which would impact the daily management of the client portfolio. While there
are no restrictions on the ability of our clients to contact and consult with the portfolio managers, it is
generally preferred that they do so through, or together with, his or her financial advisor.
Our clients may elect to change investments or portfolio manager at any time. Should financial
circumstances change or economic or market conditions change, to the extent that BPU feels that a
change is advisable, or, if in BPU’s opinion, the investments or portfolio manager selected can no longer
meet the client’s investment objectives or manage according to certain investment style parameters, or
there is a fundamental change in the management which would mandate a switch in investments or
portfolio manager the financial advisors may recommend changes in the portfolio.
The performance of the investment selections in the portfolio will be monitored on an ongoing basis;
and, depending on the platform, it is BPU’s discretion whether and when to take corrective action.
BPU has no discretion to change the client’s investment program or model. Should client agree with the
financial advisors recommendation to make a model or program change, a written authorization must
be obtained.
Item 14: Client Referrals and Other Compensation
BPU does not accept or allow our supervised persons to accept any form of compensation, including
cash, sales, awards, or other prizes, from a non-client in conjunction with the advisory services we
provide to our clients.
BPU does not compensate any persons for client referrals and does not use solicitors.
Item 15: Custody
BPU does not maintain physical custody of client funds or securities; however, under SEC Rule 206(4)-2,
BPU is deemed to have custody of certain client assets due to (i) BPU’s ability to deduct fees directly
from certain client accounts, and/or (ii) BPU’s imputed role as trustee for limited client accounts, and/or
(iii) BPU’s possession of limited client credit card information for the purpose of debiting/charging
accounts to pay advisory fees.
All clients are directed to use a qualified custodian (Pershing, Fidelity, Schwab, or TD Ameritrade). At
least quarterly, the custodian provides clients with account statements containing information including,
but not limited to, the following: type, name, price per share and number of shares owned for each
security. BPU encourages each client to review these custodial statements and to compare any reports
they receive from BPU.
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For accounts where BPU is deemed to have custody for reasons other than fee deduction, the firm
undergoes an annual surprise examination by an independent public accountant to verify client assets.
Item 16: Investment Discretion
BPU will accept discretionary authority to manage securities on behalf of clients. Discretion is limited to
implementing portfolio strategy in accordance with the client’s Investment Policy Statement via written
agreement between the client and their advisor. Each platform has different paperwork and procedures,
from a limited power of attorney to a discretionary trading agreement executed though the custodian’s
new account paperwork. Please see Appendix I for BPU Sponsored Wrap Fee Programs.
Clients may impose limited restrictions on BPUs discretionary trading authority.
Item 17: Voting Client Securities
In accordance with its fiduciary duty to clients and Rule 206(4)-6 of the Advisers Act, BPU has adopted
and implemented written policies and procedures governing the voting of client securities. BPU does not
vote client securities. Client shall in no way be precluded from contacting BPU for advice or information
about a particular proxy vote. However, we shall not be deemed to have proxy voting authority solely as
a result of providing such advice to Client.
Should BPU inadvertently receive proxy information for a security held in Client’s account, then we will
make a good faith effort to forward such information on to Client within a reasonable timeframe, but
will not take any further action with respect to the voting of such proxy.
Item 18: Financial Information
A balance sheet is not required to be provided as BPU (i) does not solicit fees more than six months in
advance, (ii) does not have a financial condition that is likely to impair its ability to meet contractual
commitments to clients or (iii) has not been subject to any bankruptcy proceeding during the past 10
years.
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